Instead of just talking in abstract ways about your customer base and your profit potential, it lets you put those things in writing and in concrete terms.

It forces you to think through every aspect of your business in advance so down the road you don’t realize you’ve made a mistake that’s cost you your business, your life’s savings, and your job.

Besides all of that, they are also important tools for getting other people interested in your business. For one, if you’ve taken the time to create a business plan, others will realize that you are serious about this endeavor and that it isn’t just some pie-in-the-sky dream.

This is all extremely important, particularly if you need any type of outside funding, such as loans or investors.

So while the bad news may be that you definitely do need a business plan, the good news is that they don’t have to be complicated. The truth is that your plan only needs to cover seven main areas and none of these areas are going to require you to write a full-length novel.

These five sections are the executive summary, the company overview, the business environment, the company description, and the action plan.

All of those sections may sound complex, but most of them won’t involve information that you don’t already know.

#1 Executive Summary

Even though this section will technically be first in your business plan, you should actually write it last because, just as its name implies, it summarizes the entire contents of your business plan.

If that sounds difficult, it isn’t. Just make sure to read through your entire business plan before you start writing the executive summary. Make a list of information that you think is the most important or that would really stand out to a reader, and be sure to include all of it in your summary.

#2 Company Overview

This section explains the guiding force behind your business. It gives them a chance to see what you have in mind for the business and how you plan to get there. Generally, the overview does this by providing a mission statement, goals, and objectives for your business.

Goals and objectives, the other components of the company overview, are often confused by first time business plan writers. Remember that goals are things your company wants to achieve while your objectives are how they plan to get there.

#3 Business Environment

This section will probably require you to do some outside market research because it involves information relating to your industry, your market, and your competition.

You need to take an honest look at the field you are preparing to enter and pay close attention to its structure, its trends, and its barriers to new businesses.

Become familiar with the major competitors in your industry and decide how you will differentiate yourself from them. Also, get to know your potential customers and what makes them tick.

The more you know about them, the more likely you will be to turn them into buyers.

#4 Company Description

At this point in your business plan, you need to go into detail about your business.

You can’t simply define your company in terms of what you sell, but also in terms of who you serve, what resources you will use, what types of employees you are looking for, what type of distribution method you’ll utilize, and more.

All of this factors combine to create your company.

In addition to this, you should also state your company’s UPS (Unique Positioning Statement). This is a one sentence statement that explains what sets you apart from all of the competitors.

#5 Action Plan

These should also reflect the goals and objectives that you’ve outlined in your company overview.

Besides these primary pieces of a business plan, you may also need to include a financial section, particularly if you plan on using it to get outside funding for your business.

This may take more thought and planning than the other sections because it will require you to make some assumptions about your business’s revenue potential. The most important thing is to base any estimates on realistic expectations, not optimistic dreams.

With some useful models and this helpful information, you’ll be well on your way to completing your effective and professional business plan.